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Help in filling out k1 worksheet in 1065

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Level 2

partners purchased a business for $700k, each 50% owner. What do I put on worksheet for each member. Do I put $350k as capital contribution and basis of $350l?

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Level 15

They bought it for $700k and paid for it with their own cash and there wasn't any debt involved?

ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.

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Level 15

They bought it for $700k and paid for it with their own cash and there wasn't any debt involved?

ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.

View solution in original post

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Level 2
they took out a mortgage, did not pay cash.
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Level 15
"They" took out a mortgage? Or the partnership did?

ex-AllStar
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Level 2
the mortgage is in both the partners names and the partnership's name
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Level 15
Sounds like the partnership has a chunk of debt instead of equity.
ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.
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Level 2
how do I enter that on the K1 worksheet, do I show under share of liabilities and if so does that increase partners basis? thank you
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Level 15
If it is the partnership's debt, it isn't going to do anything to basis.  Just enter the debt as long term notes on the balance sheet.
ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.
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Level 2
the borrowers are the partners and the company, does that change things? thank again
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Level 15
Let's look at it another way.  Are the partners going to be paying the debt out of their own pocket or are they expecting the partnership to cover the debt payments?
ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.
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Level 12
@IRonMaN   I don't do Partnerships so I probably should keep my mouth shut, but ... I thought Partners get Basis for a Partnership loan that they sign?  I know corporations require actual money paid for the shareholder to get Basis, but I thought Partners got it by just being legally obligated to pay (such as signing the loan).
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Level 12
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Level 15
Yes they do get basis for their share of liabilities.

ex-AllStar
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Level 12

"the mortgage is in both the partners names and the partnership's name"

That's typical for having the partners as individuals "co-sign" for the LLC borrowing, so that the lender has a fallback position to pursue repayment.

You don't seem to understand Basis. You didn't state what they paid for. The $700k is the Cost (Basis) for whatever they Got for the purchase and the borrowing is liability. They bought 'something' which is the asset; they might have assumed other outstanding liabilities and/or receivable asset. The Basis doesn't change or rely on how they paid or how much they paid at first, or if they paid in full or if there is also debt; it is a Known value (the Purchase) and then it becomes part of the math.

Basis in Assets purchased = cost

Any debt is entered

= Net equity is the final result.

You would have $350k capital, if they Borrowed half of the funds needed to make the purchase. You have $350k liability, if that was what got borrowed. Perhaps this is your situation:
$700k (various assets)
$350k liability <== the debt
$175k Capital Equity partner 1 (paid in cash)
$175k Capital Equity partner 2 (paid in cash)
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Level 2
I apologize for my ignorance. they bought a building for $350k, goodwill for $323k, and equipment for $50k and they took out a loan for $700k.
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Level 15
It sounds like each partner has zero contributed capital and each partner's share of liabilities is $350K.

ex-AllStar
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Level 15
Is the loan for 700 or 723?  If 723 they might have a couple of bucks of capital.
ex-AllStar, ex-Lutefisk taste taster, ex-ACME product tester
and ex marks the spot where those rocks and anvils hit me.
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